When Even "Erudite" Economists And Journalists Blast QE

Are you saying it took the highbrow economist cadre five years to figure out and agree with what we first said in 2009, and for which we received endless ridicule, abuse and accusations of fringe insanity? Yes. We are saying that.

First, from the "erudite" economists at the IMF, and its just released report titled "Monetary Policy in the New Normal":

Should unconventional policy tools become conventional? During the crisis, central banks employed unconventional tools (such as bond purchases and forward guidance) to provide economic stimulus as the policy rate approached zero, and to ensure transmission despite disrupted financial markets. This raises the question of whether unconventional tools should also be used in tranquil times. We conclude that with the exception of forward guidance, the costs seem to exceed the benefits.

And then, from the "erudite" journalists at The Economist:

When QE was first announced, it was the equivalent of emergency surgery. Then, further rounds were needed to help the economic patient recover. The third step was for the Bank of England to hand back to the Treasury the interest it earned on government bonds, in the name of good accounting. And now what was originally a temporary arrangement has been turned into something more permanent.


All along, the authorities have denied that this process represents “monetisation” (the monetary financing of government debt), which is something of a taboo in central banking. But the cumulative impact is similar. The British government has in effect ended up with an interest-free loan from its central bank, financed by money creation. The debt has not been formally cancelled, but it might as well have been.


[A]nother reason why monetisation has always been frowned upon is that it is an easy option. Why should governments finance spending with unpopular taxes or borrow from suspicious bond investors when they can get the money from a friendly central bank? The process makes democratic leaders less accountable; by boosting asset prices, which are mostly owned by the rich, it may well have led to a rise in inequality, without the sanction of any vote. Perhaps in ten or 20 years’ time, recent events will be seen as the moment the world crossed a line.

Wait a minute, that is what we said five years ago!

So, based on the preceding, all we can conclude is: "Those damn tinfoil-hat, conspiratorial, fringe bloggers at the IMF and the Economist."


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